๐ Why is Recovering Investments After Significant Losses So Challenging?
Let's break it down:
- ๐ Small Loss Example:
- If you lose 3%, you need a 3.09% gain to break even.
- Example: Start with ยฅ100,000. Lose 3%, balance drops to ยฅ97,000. To recover, you need a 3.09% gain on ยฅ97,000 to get back to ยฅ100,000.
- ๐จ Large Loss Example:
- If you lose 30%, you need a 42.87% gain to recover.
- Example: Start with ยฅ100,000. Lose 30%, balance falls to ยฅ70,000. To recover, you need a 42.87% gain on ยฅ70,000 to get back to ยฅ100,000.
- โณ Recovery Takes Time:
- Larger losses require significantly higher gains, which are harder to achieve.
- The recovery relies on rare, strong market conditions, making it even more challenging.
๐ Key Takeaway:
Understanding these dynamics is crucial for making informed investment decisions and effectively managing risks.
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